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Profits, Revenues at ICN Set Record for Third Quarter

Earnings: The Costa Mesa drug maker expects strong performance to continue, thanks to its hepatitis C medication.


ICN Pharmaceuticals Inc. on Monday posted record profit and revenue for the third quarter, powered by the strong performance of its drug that helps treat the liver virus hepatitis C.

The Costa Mesa drug maker, which is planning to split into three companies, also should set records in the fourth quarter, Chief Executive Milan Panic said. He said he expects all sectors to perform well the last three months of the year. Net income for the third quarter totaled $36.6 million, or 45 cents a share, up 15% from $31.8 million, or 39 cents, a year earlier. The results matched Wall Street's expectations. Revenue rose 14% to $207.3 million.

ICN's stock, which has moved up 41% this year, closed Monday at $35.63, up $1.25 a share, on the New York Stock Exchange.

ICN's record performance was fueled partly by royalty revenues from ribavirin, which Schering-Plough Corp. combines with another drug to treat hepatitis C. Ribavirin royalties jumped 48% to $49 million from $33 million a year ago.

Ribavirin received another boost last week when a study found Schering-Plough's experimental hepatitis drug, Peg-Intron, is more effective than the standard treatment for chronic hepatitis C when the drug is used with ribavirin. Schering-Plough said it is likely to seek Food and Drug Administration approval early next year to package Peg-Intron with ribavirin.

Hepatitis C, a virus that can lead to cirrhosis and liver cancer, affects 4 million people in the United States and 170 million worldwide. The virus is contracted mainly through infected blood and contaminated needles.

Despite a weakened euro, ICN sales in Western Europe reached $49 million, up more than 4%. British sales of a drug that treats the neuromuscular disease myasthenia gravis, along with the strong European showing of a precancerous skin treatment, helped boost the results. The company also logged higher sales in Latin America, Eastern Europe and Asia.

Panic said ICN operations in Eastern Europe could make a healthy contribution to ICN's bottom line in the future.

The company has tripled its sales force in Russia to 300 and expects to regain legal control of its huge Yugoslavian factory, he said.

Panic, the former prime minister of Yugoslavia, said Yugoslavian operations could add as much as 10 cents per share to the company's 2001 results.

Under the restructuring plan, ICN will split into a unit that owns the rights to ribavirin, a company that will run the international operations and a unit to oversee its North and South American businesses. Panic will remain head of ICN's international business, to be based in Moscow.

ICN's North American operations cast the only cloud over the quarterly results, as operating profits tumbled 42% while sales fell 26%. ICN cited problems with certain product lines but refused to elaborate. The company said it believes the difficulties have been resolved in this segment, which accounts for 17% of the company's revenue.

ICN officials also told analysts during a conference call the company hopes to receive regulatory approval to begin human trials soon for levovirin, a new version of ribavirin that has shown fewer side effects in preclinical trials. Even though it is years away from the market, levovirin's prospects excite investors.

"ICN had been lacking in new product hope, which is a key [driver] for any pharmaceutical stock," said Sutro & Co. analyst D. Larry Smith, who has a "buy" rating on the company. "Levovirin gives them that hope."

As part of the restructuring, the Ribapharm unit that will own rights to ribavirin and ICN's international unit are expected to go public in coming months, market conditions permitting.

The Ribapharm unit could be worth as much as $4 billion, topping ICN's market capitalization of $2.8 billion, said Richard Stover at Arnhold & S. Bleichroeder investment firm in New York.

ICN plans to use proceeds from Ribapharm's initial public stock offering to help repay its $585 million debt, Panic said.

The company also announced Monday that former Canadian Prime Minister Kim Campbell had been elected to the board.


Bloomberg News was used in compiling this report.

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